Supreme Court ruling has wide implications on the definition of a ‘worker’.

Determining a person’s employment status has been a contentious legal issue since the middle of the 20th century, and there is a great deal of legal precedent around the various definitions and tests for status. Although the current cases have tended to focus on employment rights, there is a large body of case law around tax, and the principles applied are not always entirely consistent, which adds to the difficulty. The sheer variety of arrangements that can be made between a business and those providing their services adds to the difficulty in establishing general principles that will apply to every set of facts.

The Supreme Court ruled on 13 June 2018 that a plumber who was officially self-employed was in fact a worker. The case had previously been heard at the Employment Appeal Tribunal and in the Court of Appeal with the latter finding that a ‘self-employed’ plumber should be regarded as a worker. The decision by the Supreme Court could trigger huge changes for many businesses.

 What was the case about?

Pimlico Plumbers Ltd and another (Appellants) v Smith (Respondent)

In this case:

  • the contract stated that Gary Smith was self-employed
  • Smith had been working for Pimlico Plumbers for around six years when his contract was terminated following his suffering a heart attack
  • he was required to work a minimum of 40 hours per week
  • he was subject to company rules about procedures and good practice, including about his appearance
  • he was required to wear uniform and drive Pimlico Plumbers vans, for which he paid a hire charge
  • he was not allowed to take Pimlico Plumbers clients as private clients and, if he did, this would lead to dismissal
  • he did not get paid unless Pimlico Plumbers got paid for any engagement that he performed
  • he did not work for other clients, although some of his colleagues did
  • he could swap jobs with other plumbers, but the court said this was more akin to workers swapping shifts than to real substitution
  • he was VAT registered and also registered as self-employed with HMRC.

After a heart attack in 2010 Smith wanted to work three days a week rather than five. Pimlico refused his request and took away the van. He claimed that he was unfairly dismissed and an employment tribunal made a preliminary finding that he was a ‘worker’ within the meaning of the 1996 Employment Rights Act.

The five judges at the Supreme Court upheld this decision and rejected an appeal by Pimlico Plumbers. Lord Wilson ruled that an employment tribunal was ‘entitled to conclude’ the firm could not be regarded as having been a ‘client or customer’ of Mr Smith. The decision clarified that plumber Gary Smith’s work for the company met the definition of ’employment’ under section 83(2)(a) of the Equality Act.

Lord Wilson said Smith should be considered as a ‘limb (b) worker’ and therefore entitled to certain rights. So-called ‘workers’ do not enjoy the full range of employment protection rights that full-time staff do but are entitled to elements including holiday pay.

What implications are there for similar ‘self-employed’ workers?

As a recap, a person is generally classed as a ‘worker’ if:

  • they have a contract or other arrangement to do work or services personally for a reward (your contract doesn’t have to be written)
  • their reward is for money or a benefit in kind, for example the promise of a contract or future work
  • they only have a limited right to send someone else to do the work (subcontract)
  • they have to turn up for work even if they don’t want to
  • their employer has to have work for them to do as long as the contract or arrangement lasts
  • they aren’t doing the work as part of their own limited company in an arrangement where the ‘employer’ is actually a customer or client.

This case was difficult as Mr Smith could choose when he worked and which jobs he took. He was also required to provide his own tools and equipment. However, the Court of Appeal held that he was a worker because, amongst other arguments, he was required to use the firm’s van for assignments and was contractually obliged to do a minimum number of hours a week. There were also issues about the ability to substitute someone else to do the work.

Although each case is decided on the individual facts, this decision may have a huge impact on the flexible working economy, particularly self-employed workers potentially being able to:

  • claim sick pay
  • claim annual paid leave
  • bring unfair dismissal cases.

Currently there are a number of similar cases going through the courts. It is possible that the government will be forced to clarify the law in respect of these issues.

Article from ACCA In Practice